Restaurant IT Budgets on the Rise

By Abigail A. Lorden | April 08, 2008

Restaurants are allocating larger portions of their annual revenue to IT initiatives, according to the 10th annual Restaurant Technology Study, published by Hospitality Technology. Since 1998, the study has polled restaurant operators on a variety of IT-related topics, ranging from the popularity of specific hardware and software features to overall IT integration strategies. It also tracks IT investment trends, and this year's report shows that more restaurants will spend a greater percentage of their budget on IT in 2010 than they ever have in the past.

"Restaurants have long had a reputation for being slow to adopt new technologies, and haven't traditionally earmarked a significant portion of their revenue towards IT initiatives. I'm excited to report that IT budget as a percentage of overall revenue is beginning to trend upwards," says Dr. Cihan Cobanoglu, associate professor of hospitality information technology at the University of Delaware and the study's lead author.

The number of restaurants allocating only small amounts of revenue towards IT is dropping. Just as recently as 2007, more than half of all restaurants, nearly 55%, spent just 1% or less of their annual revenue on IT. In 2008, the number of restaurants spending 1% or less on IT dropped to 38.2%, and is projected to drop to 22.5% by 2010.

By contrast, a larger number of restaurants are allocating more dollars towards IT initiatives. Last year, 9.7% of restaurants allocated 3% of their budget to IT. In 2008, 11% of restaurants will spend 3% of revenue on IT, and by 2010, nearly 20% of restaurants are projected to allocate 3% of their revenue to IT - an all-time high.

"This is remarkable considering the amount of revenue in question," says Cobanoglu. According to the study, the average annual revenue for a small company is less than $50 million, and can range from $120 million for mid-sized companies to $700 million or more for large companies. "Even a one percent increase means thousands or even millions of dollars in increased IT spending."

These figures are supported by recent data from the National Restaurant Association, which reports that technology initiatives will be the third-highest spending priority in 2008, second only to food safety and training. According to that report, approximately one-third of restaurants across all dining segments will allocate a larger portion of their budget to IT in 2008.